Disappointing innovation – pitch 1

I have just spent a day with people talking about the future of the media. In amongst the usual presentation, panels, Q&As and watery coffee they have been hosting brief talks by interesting innovators in the media sector in Europe.

They were mostly perfectly nice ideas, plausible and well explained. But perhaps I have been hearing these ideas and pitches for too long because they felt a bit disappointing. Not only are many of them small, unambitious and in some ways an admission of defeat, but fundamentally they are little changed from the hopeless pitches I was listening to twenty years ago and more at News International.

Here, for example, is one generic pitch which has been around as long as the internet and still keeps popping up with different names…

The “Incremental Revenue” pitch (aka the “money for nothing” pitch)

This one involves saying to an existing media player with an established brand that you are going to conjure them up more money out of thin air. Better than that, it will be money that they can’t themselves get on their own. Better yet, there is no risk of damaging their existing business. What’s not to like!?

The ask

The existing media player is asked to give the start-up access to some or all of their content, plus their brand. The start-up will then cleverly combine it with other content and brands from other places and sell it (under their own brand, but heavily using the established media brand to help) to people who would never buy the core product (this will be young people / foreign people / people in niche sectors being targetted by a special product / people whose purpose is badly served by the core product / a whole new product etc)

The payback

Revenue share. Sometimes of subscription fees, more often of advertising. Usually calculated in a rather opaque way, or as a “revenue pool” which is shared between all the content providers on an arbitrary basis such as how often their content is accessed. If there is revenue then some fraction of it gets paid to their partners. Sometimes they offer a tempting non-financial morsel to appeal to operational people which gets their signature-hand twitching (being able to add to the circulation figures of print products for example, is better than gold to some circulation-focussed publications)

The promise

Nothing really. The established brand and content is zero-valued up-front, they just get a cut of revenue. Inevitably when this pitch is made revenue is approximately zero but huge sums are anticipated by year 3 and after year 5 it will have overtaken Google, Amazon and Apple combined.. Despite the confidence that these predictions are, if anything, conservative, no guarantee of revenue is available (“we’re a startup, we can’t afford to make guarantees”). The established brand is invariably used in pitches to other people (despite being zero rated financially).

The threat

If they deliver their lofty promises, they will get bigger than the brands that are contributing content and become a strategic threat.

The rational response to the pitch

“Come back when those big numbers you’re expecting start to become real” (the likely reply is “but we won’t get there without your content and brand” which leads to the obvious conversation about value)

or

“no guarantee, no deal”.

The ways the start-up might get people to sign up anyway

Either get them to irrationally over-value your offer (auditable circulation is like cocaine to some print publications) or get them to follow the crowd for fear of looking foolish or missing out. Depending who you’re talking to they might be tempted by equity.

Likelihood of the big numbers eventually being delivered

Almost zero (meaning the threat is, in reality, low as well). But some of these turn in to perfectly decent, if unexciting and minimal, revenue streams.

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